Analysis Of Nokia Stock Price And Why It Is Undervalued

Nokia Investment Summary

Nokia has been constantly adapting its strategy to change in the market. Based on the current NOK stock price $5.6-$5.8, and the analysis of fair values, $NOK is a buy. We have put more weightage on Comps analysis as compared to DCF analysis here, because Nokia has recently changed its strategy and started benefitting from the growing 5G market, thus the true value of Nokia’s potential growth would not be reflected by its past performance.

About Nokia’s Transitions

From its humble beginning in 1865 as a single paper mill operation, Nokia has found and nurtured success over the years in a range of industrial sectors including cable, paper products, rubber boots, tires, televisions, and mobile phones.

Nokia’s transition to a primary focus on telecommunications began in the 1990s. The first GSM call was made in 1991 using Nokia equipment. Rapid success in the mobile phone sector allowed Nokia to become by 1998, the best-selling mobile phone brand in the world.

In 2003 Nokia introduced the first camera phone. In 2011, to address increasing competition from iOS and Android operating systems, Nokia entered into a strategic partnership with Microsoft. In 2014 Nokia sold its mobile and devices division to Microsoft.

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Highlights from 2020

In 2020, Nokia had three reportable segments for financial reporting purposes:

  1. Networks: Net sales in 2020 were EUR 21.85 million, a decrease of EUR 1.46 million, or 6%, compared to EUR 23.32 million in 2019. The decrease in net sales was primarily due to a decrease in Networks net sales, and, to a lesser extent, a decrease in Nokia Software and Nokia Technologies net sales. Gross profit in 2020 was EUR 8.19 million, a decrease of EUR 71 million, or 1%, compared to EUR 8.26 million in 2019.
  2. Nokia Software: Nokia Software net sales in 2020 were EUR 2.66 million, a decrease of EUR 111 million, or 4%, compared to EUR 2.77 million in 2019. The decrease in Nokia Software net sales was primarily due to core networks and applications. Nokia Software gross profit in 2020 was EUR 1.38 million, a decrease of EUR 71 million, or 5%, compared to EUR 1.45 million in 2019.
  3. Nokia Technologies: Nokia Technologies net sales in 2020 were EUR 1 402 million, a decrease of EUR 85 million, or 6%, compared to EUR 1 487 million in 2019. The decrease in Nokia Technologies net sales was primarily due to lower brand licensing net sales and lower catch-up net sales. Nokia Technologies gross profit in 2020 was EUR 1 393 million, a decrease of EUR 66 million, or 5%, compared to EUR 1 459 million in 2019.
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